Glen Doth Know

Anthracite Capital is Reinflating
By
Glen Bradford
Instead of talking about finance institutions that are being diluted like Citigroup (C) and financial institutions that are so hot they’re already above their November lows like Wells Fargo (WFC) and Goldman Sachs (GS), I’m going to introduce you to a better place where it’s bottoms up from here.
After getting the wind knocked out of it, Anthracite Capital shows signs of life. Granted that the price has probably exploded higher from $0.74 by the time this article gets published, let us use it at a baseline. What do we know about Anthracite at $0.74?
1. Anthracite is trading at a P/E of 0.487 if you knock out the Q4 2008 earnings nightmare and look back 1 year from Q3. The reason I took out Q4 is because the loss claimed appears to be a one-time huge write off, followed by positive earnings the next quarter.
2. Anthracite Capital is trading at a book value of 0.1.
3. Anthracite Capital is traded on the New York Stock Exchange. Let me repeat. This is a company cheaper than the listing requirements on the New York Stock Exchange. It either increases in price or eventually gets delisted.
All of these figures indicate that Anthracite is priced for bankruptcy. Where’s the good news?
1. They have pushed back the disaster twice already and have been in talks to resolve the issue. If I know anything about creditors, the last thing they want to do is run their debtors into the ground.
2. Anthracite was profitable in Q1 2009, just not as profitable as it used to be. If you optimistically flat line the profit figures from Q1 2009 into the future, your P/E is still 0.685. Note that Q1 of 2008’s Net Income Applicable to Common Shareholders is twice as large of that of any quarter as far back as I can see. So, comparing Q1 2009 to Q1 2008 isn’t fair to begin with. The bottom line here is that comparing the income of Q1 2009 to Anthracite’s history --- things match up but the revenues are weaker.
So, what am I doing about it? I’m buying. I probably already have a sizeable position. I’d say you could add this to my suggestions for 100% in 1 month, but that would be an understatement. I’d be surprised if AHR didn’t see $2 by June 18th.
Disclosure: Glen and his investors own AHR.


Title ideas: China: Harder, Better, Faster, Smaller
China: Go Small Or Go Home
By
Glen Bradford
Cramer’s a buyer of Bucyrus. I’ve been a fan of Bucyrus since I came across it in late August 2008. Back then, I grabbed the coattails of the top of the roller coaster and rode it down from $67 to $62. If I liked it then, imagine how much I like it now at $23, on its way back up. Up over 100% from its low, why is this growing company trading so cheaply with a P/E of 6.86? I’ve got one idea. Opportunity cost. If you want to play china the right way right now, you have to start small and work your way up to see the big picture.
Bucyrus makes the mining equipment. Let’s take a look at some folks that may use this kind of equipment and are trading at a discount to Bucyrus. To set the stage, Bucyrus has a P/E of 6.8 and is selling at 1.7x Book Value. Let’s look at some undervalued Oil and Coal ideas that are all less than half as expensive as Bucyrus with respect to both metrics.
1. Puda Coal (PUDC) is being featured at the China Rising Investment Conference today and is set to run from 10:00-10:30am. Puda Coal is a supplier of metallurgical coking coal to the industrial sector in the PRC. They are currently in the process of vertically integrating their supply chain. Goldman Sachs just upgraded the entire coal industry. The reason for upgrading the industry is mostly due to China. Looking at these numbers, I’m going to agree with Goldman.
2. Longwei Petroleum Investment Holdings (LPIH) is one of the leading diesel, gasoline, fuel oil and solvent oil distributors/wholesalers in Taiyuan City, Shanxi Province, P.R. China. Do note that they’re expansion is being financed through their working capital. Bank loans in China have been unbearably tough to get this last year --- so this is a strong point.
3. China North East Petroleum (CNEH) is engaged in the exploration and production of crude oil in Northern China. They just signed a contract to drill another 48 wells in the next 10 months, taking their total to 303 after the project is completed. Crunch the numbers and that’s 18% growth in production in 10 months.
4. Now, I would outline the advantages of China Energy (CHGY), but I did that 2 weeks ago. Instead I’ll give you a bonus pick that’s American. Crimson Exploration (CXPO) is even less than half of half as expensive by both metrics as Bucyrus. They are an independent natural gas and crude oil company engaged primarily in the United States, Gulf Coast and South Texas regions.
Now, I’m not telling you that you’re not likely to make a lot of money on Bucyrus right now. What I’m saying is that if you have two opportunities, and one of them is more likely to return more money than the other --- it would make sense to buy into the one with better returns, right? That said, Bucyrus in my opinion is definitely worth more in the long run. It’s trading less than its backlog and that’s pretty much sinful.
Disclaimer: Glen and his investors own LPIH, PUDC, CNEH, CHGY, CXPO.

Labels: ahr, C, CHGY, CNEH, cxpo, lpih, PUDC

By Mark Bradford

I am just about an easy-going guy as you can meet.

Sure I get excited when I am in charge of something or other similar times, but for the most part I’ll just move over or stay out of the way when people try to use their perceived power on me because, quite honestly, life is too short to bother with the small stuff.

I have always believed most of what people told me anyway. My dad said “Save your money, son” and so I did. My mom said “Eat your vegetables” and so I did. My professor told me”Invest $250/month in the stock market and you will be a millionaire at the end of 40 years because the stock market returns about 9 percent annually, give or take.” So I did.

In fact, my wife and I invested $500 every month, through thick and thin and sending three kids to college. Like the rest of us, we watched as our life savings seemingly disappeared this past winter, even though they were placed in "safe" mutual funds. Being the easy-going guy that I am, I just shrugged and said, “Give it time, it will come back.”

So I did. That was OK until I watched a 60 Minutes episode in which they detailed how all the mutual fund managers were getting rich despite the bad economy. All of it was and still is perfectly legal, of course. They were still charging 3-5 percent management fees despite incurring huge losses through blatant mismanagement of MY money.

MY money. I have a son who is a budding investment guru. His “practice” portfolio (which included $50,000 of our family money) took a dive this past winter, too. But his losses were approximately equal to or less than my “professionally managed” funds. So, a college kid still wet behind the ears was able to think just like “seasoned pros” who supposedly have my best interests at heart.

My ass, they do. It suddenly occurred to me that every does time I was paying 3-5 percent fee just to dump money into their fund, I was losing money and they were taking (not making) it. They were the ones living the high life and vacationing in Hawaii while I spent two months trying to figure out how to pay an unexpectedly high tax bill.

Then it occurred to me that I didn’t HAVE to let these overpriced underachievers invest my money for me. If I was going to lose an automatic 3-5 percent upfront, I wanted to do it myself. I already had my Internet brokerage account and access to CNBC (my guess is the fund managers are drinking lattes and not watching Squawk Box in the morning). I am able to track the market on my own and, in fact bought the financials at historic lows and have a selling strategy in place.

And I don’t charge myself 3-5 percent. So, I called my IRA mutual fund holder and told them to get me out and send the cash to my discount broker. I filled out all their indecipherable forms and am now waiting for the cash to hit my Internet account. In fact, I have been waiting two weeks for these highly paid mutual fund managers to write a check and get it done. Great service.

When that happens, I will work with my son to choose the most effective accounts for long term growth and stability. I will have my ups and downs and I will make mistakes. But I can pretty much guarantee that if anyone gets a chance to live in the Hamptons on my 3-5 percent this time, it will be me.

When I was in high school in the 1960’s it was a popular phrase to say “Stick it to the man.” Little did I know “the man” would be disguised as some greedy mutual fund manager and that he would bleed me slowly and make me like it.

My change of heart is just my way of sticking him. And I hope others do too.

By Mark Bradford

Labels: AIG, C, FAS, FITB, HBAN

I gotta love it.

First, mark to market was adjusted by FASB

Then, citi claims that it won't have an effect.

Well, it kind of doesn't.

In their first quarter summary, they disclose that now they are using them!

Citi adopted FASB’s recent rule changes regarding fair valuation (FAS 157) and other than temporary impairments (FAS 115). The adoption of the changes to FAS 157 had no impact on Citi’s financial results. The adoption of the changes to FAS 115 resulted in approximately $631 million pre-tax of lower impairment charges recorded in revenue in the current quarter. Additionally, the cumulative effect of the changes to FAS 115, which did not impact revenues, led to a $413 million after-tax increase in retained earnings and an offset in other comprehensive income on the balance sheet.

Haha, their CEO doesn't even attend the conference call.

Hey, they are just trying to survive. I would imagine if you can poke them with a fork, and they wriggle like a snake, they probably are a snake, and they might bite you, but when the government is wrangling them already... the risk is mitigated a bit.
http://seekingalpha.com/article/131531-citigroup-s-horrible-conference-call

I'm still riding this bucking bronco.

Labels: C

Well the shorts prefer shorting c

http://shortsqueeze.com/?symbol=c&submit=Short+Quote%99

insider transactions look better with c

http://finviz.com/quote.ashx?t=c&ta=1&p=d

mutual funds prefer etfc

http://www.thebuylist.com/default.aspx?Stock=etfc

etfc’s technicals are stronger

http://stockcharts.com/h-sc/ui?s=etfc&p=D&yr=0&mn=6&dy=0&id=p04446711432

consensus.. Citigroup is more risky! Surprise!!!!

So, if we think that citi will survive this, we will make more money, especially In the short term, because this thing is set to be a short squeeze rocket.

What do we know about Citi?

http://money.cnn.com/2009/03/10/news/companies/citi_profitable.reut/
1. It was profitable or claims to be profitable in the first 2 months of 2009.
2. Mark-to-profit accounting
3. Selling less than book value $13
4. Selling at a P/E of less than 2 according to historical earnings
5. Other banks are putting down record numbers, citi is set to follow suit on Friday. That’s my take.

I’ll stick with citi because there is tremendous upside on Friday. I think the risk is limited due to the first 2 points and the last point.

http://finance.google.com/group/google.finance.662713/browse_thread/thread/8b63f678f81ce445

Hope this helps,
Glen


From: Andy C
Sent: Wednesday, April 15, 2009 2:51 PM
To: Bradford, Glen Richard
Subject: Re: C or ETFC?

Thanks for the response. I'm not really that familiar with what ETFC has done lately but I noticed they had a loss in 2007 larger than in 2008, which seemed a little odd to me considering the economic conditions. I'm fairly diversified (at least long term) but I recognize there's some money to be made short-term in the financial sector right now. I saw you recommended FAS, but the way people play that stock and FAZ makes me a little nervous because I'm not completely familiar with how it all works. I'm fine with risk, but only when I know what I'm getting into ;).

I put an order in for a small amount of C but I don't know if it will be filled today at all. Still very interested to hear what you find on ETFC vs C!

Thanks,
Andy
On Wed, Apr 15, 2009 at 2:17 PM, Bradford, Glen Richard wrote:
Food for thought:

In situations like this, where it’s hard to know exactly what’s going on… the best bet is to diversify.

My big bank bets mostly are along the lines of the earnings they have done in 2006 and how I understand they’ve reacted over the past 2 years aka taken precautionary measures, government bailouts, etc.

I’ll take a deeper look at ETFC vs C tonight

From: Andy C
Sent: Wedn
Subject: C or ETFC?

Glen,
What do you think of ETFC right now? They seem pretty undervalued. I have some money to put in today and I'm trying to decide between ETFC or C, with earnings coming out soon for both of them. I originally had a position in C that I sold at 3.75 so I'm a little hesitant to get back in around that price again, since I know there's a bigger downside to be had. Does it come down to 'ETFC = safer'?

Thanks,

Andy

Labels: C, ETFC

Allow me to start off by illustrating my sentiment from January 2008 – February 2009: I hate banks and I have no idea what they are doing. I hate anything financially related.



But, I find myself not hating banks anymore. What happened? I’ve got 8 leading indicators that people might be aware of but aren’t catching headlines like they should be and I’ve got 4 monster catalysts. What do I know, I’m only the Motley Fool’s Hottest Player going into Easter Weekend. Further, My entire college tuition is riding on the stock market.



Leading Indicators:



1. Federal Funds Target Rate is nil. This means that banks can borrow as cheaply as they ever have been able to. When you borrow at these interest rates, the net present value of any opportunity where you can at least get your money back is a good one to be taking.
2. Banks as a sector cheap from a historical perspective. I wonder why? Fear, panic, disorder, lack of trust, lack of speculation --- just a few ideas.
3. There is tons of cash on the sidelines. Blood is in the streets. There has definitely been “the slaughtering of the speculator” over the past year and a half. I believe now is the time when the speculator finally gets congratulated.
4. We are up 28% off the bottom according to the S&P500.
5. Global Markets are leading the way. They are up 53.4% according to EEM [iShares MSCI Emerging Markets Index (ETF)].
6. My uncle who is a banker panicked and sold out of the market at Dow 6700.
7. Mark-to-market has been relaxed to ‘mark-to-whatever-makes-us-look-good.’ Aka: Mark-To-Profit.
8. The uptick rule might come back. In my opinion, this isn’t necessary at this point.



Monster Catalysts:
1. Citigroup and Bank of America said they were profitable in the first 2 months of 2009. Great! Now they can do whatever they want to their balance sheet with the relaxation of mark-to-market. What does that imply? How can you lose money when you get to put whatever you want on a balance sheet? Especially if you’re a bank and you thoroughly understand how to crunch numbers and make them look favorable, you’re going to be looking really good now. It’s the Enron dilemma of “mark-to-model.” I could come up with some great spreadsheet models that make me look like an undervalued opportunity.
2. It’s already happening! Wells-Fargo is coming in crushing analysts. Well, of course! What do you expect when you can borrow money to invest in opportunities and you’re not paying a significant interest rate on what you borrow?
3. Analysts are going to get caught with their pants down this week. Earnings are coming out. Tuesday: Goldman Sachs; Thursday: JPMorgan Chase; Friday: Citigroup. There is so much upside that they simply can’t see because they don’t really understand what’s going on. If they did, they wouldn’t be analysts. They’d be retired. What does this do? This sets up an opportunity for some huge price target upgrades, usually after the price actually appreciates to that target. Have you noticed that analyst price targets seem to be a lagging indicator of stock prices --- or is it just me?
4. Debt upgrades. Once Mark-To-Profit kicks into full swing, the ratings agencies have to think a little more highly of these poor banks.



How to play this one:



I like a couple insurance agencies in decreasing order: CNO, GNW, PNX. I think GNW didn’t need the TARP anyway. That’s a sign of strength. Am I the only one seeing this?



I like a couple bank plays, also in decreasing order: FAS, C, BAC. I’m not into the Wells-Fargo’s and the Goldman Sach’s or even JP Morgan’s of the world --- where is the upside there? 100%? Not enough.



Disclosure: Glen Bradford owns CNO, GNW, PNX, FAS, C, BAC and/or options on them in his and his investor’s accounts.

Labels: BAC, C, CNO, EEM, FAS, GNW, IYF, PNX

Allow me to start off by illustrating my sentiment from January 2008 – February 2009: I hate banks and I have no idea what they are doing. I hate anything financially related.



But, I find myself not hating banks anymore. What happened? I’ve got 8 leading indicators that people might be aware of but aren’t catching headlines like they should be and I’ve got 4 monster catalysts. What do I know, I’m only the Motley Fool’s Hottest Player going into Easter Weekend. Further, My entire college tuition is riding on the stock market.



Leading Indicators:



1. Federal Funds Target Rate is nil. This means that banks can borrow as cheaply as they ever have been able to. When you borrow at these interest rates, the net present value of any opportunity where you can at least get your money back is a good one to be taking.
2. Banks as a sector cheap from a historical perspective. I wonder why? Fear, panic, disorder, lack of trust, lack of speculation --- just a few ideas.
3. There is tons of cash on the sidelines. Blood is in the streets. There has definitely been “the slaughtering of the speculator” over the past year and a half. I believe now is the time when the speculator finally gets congratulated.
4. We are up 28% off the bottom according to the S&P500.
5. Global Markets are leading the way. They are up 53.4% according to EEM [iShares MSCI Emerging Markets Index (ETF)].
6. My uncle who is a banker panicked and sold out of the market at Dow 6700.
7. Mark-to-market has been relaxed to ‘mark-to-whatever-makes-us-look-good.’
8. The uptick rule might come back. In my opinion, this isn’t necessary at this point.



Monster Catalysts:
1. Citigroup and Bank of America said they were profitable in the first 2 months of 2009. Great! Now they can do whatever they want to their balance sheet with the relaxation of mark-to-market. What does that imply? How can you lose money when you get to put whatever you want on a balance sheet? Especially if you’re a bank and you thoroughly understand how to crunch numbers and make them look favorable, you’re going to be looking really good now. It’s the Enron dilemma of “mark-to-model.” I could come up with some great spreadsheet models that make me look like an undervalued opportunity.
2. It’s already happening! Wells-Fargo is coming in crushing analysts. Well, of course! What do you expect when you can borrow money to invest in opportunities and you’re not paying a significant interest rate on what you borrow?
3. Analysts are going to get caught with their pants down this week. Earnings are coming out. Tuesday: Goldman Sachs; Thursday: JPMorgan Chase; Friday: Citigroup. There is so much upside that they simply can’t see because they don’t really understand what’s going on. If they did, they wouldn’t be analysts. They’d be retired. What does this do? This sets up an opportunity for some huge price target upgrades, usually after the price actually appreciates to that target. Have you noticed that analyst price targets seem to be a lagging indicator of stock prices --- or is it just me?
4. Debt upgrades. Once ‘mark-to-whatever-makes-us-look-good’ kicks into gear, the ratings agencies have to think a little more highly of these poor banks.



How to play this one:



I like a couple insurance agencies in decreasing order: CNO, GNW, PNX. I think GNW didn’t need the TARP anyway. That’s a sign of strength. Am I the only one seeing this?



I like a couple bank plays, also in decreasing order: FAS, C, BAC. I’m not into the Wells-Fargo’s and the Goldman Sach’s or even JP Morgan’s of the world --- where is the upside there? 100%? Not enough.



Disclosure: Glen Bradford owns CNO, GNW, PNX, FAS, C, BAC and/or options on them in his and his investor’s accounts.

Labels: BAC, C, CNO, EEM, FAS, GNW, IYF, PNX

For those of you who passed simple math, 2+2=4

For those of you who understand a successful merger/acquisition, the goal is the combination of the two companies to yield more than their separate parts, essentially 2+2=5

Anyway, what you saw in Wells Fargo is going to happen over the next 5 weeks to the entire banking sector as well. If you cut the rate at which banks borrow to finance their loans, that increases their profit margin. Expect either a blockbuster quarter or a write off, but the blockbuster is more likely in my opinion.

Get ready to either be positioned in these stocks or miss the boat.

Tuesday: Goldman Sachs

Thursday: JPMorgan Chase

Friday: Citigroup reports

Where is the play? FAS. Further, I like Citigroup over JPM and GS, cause --- it has the most upside.

If I owned AIG, I'd sell out at $5 if it ever gets that high. The old CEO laughed at management's decisions since he left, go figure. Pass the blame.

If you're into insurance, GNW, PNX, and CNO are the ones I'm riding.

Labels: AIG, C, CNO, FAS, GNW, GS, JPM, PNX

Bank of America - Now is a good time to buy January 2011 Calls on BAC.

Also, expect to see HIG beat the market this next week.

It's at $14.59, $20 sounds good. I expect $25. I expect it to be a lot like Citigroup, C.

These ideas are not like my Buffet ideas. But, my roomate wanted my thoughts on the industry for the next week. Also, I hate the autoindustry, but out of them all, I like Ford, F the best. And that's only if they get the bailout they want.

Labels: BAC, C, F, HIG